The Coalition’s surplus focus
Who else but that old master of political imagery Paul Keating could sum it all up so colourfully? The Australian economy is stagnant, and he says the Morrison government can’t do anything about it because the Liberal Party has a “surplus virus” in its bloodstream.
The former treasurer and prime minister, credited as a great economic reformer, says “the economy is … like the car idling at the lights and waiting for the lights to turn green to take off again”. Echoing the sentiments of Reserve Bank governor Philip Lowe earlier this week, Keating says the economic growth rate of 1.4 per cent shows the economy needs help. Low interest rates and tax cuts can’t kickstart it again; more fiscal stimulus is needed. Keating nominates borrowing to fund “a long program of really important infrastructure”. What better time than now to take advantage of historic low interest rates?
Keating told 2GB that the Liberals act as if “it’s naughty not to be in surplus”. And it works – analysis by the Guardian Essential Report’s pollster Peter Lewis credits the Morrison government’s May budget, with its promise to get the country “back in the black”, as the “single moment that sparked the dramatic turnaround in Coalition fortunes”. Lewis backs this up by reminding us that the government also used its ready access to taxpayers’ money to launch a massive advertising campaign to sell the message.
Lewis says the Liberals were already perceived to be the “better economic managers” – it’s their default position. But by demonising Labor’s more “well thought through and nuanced” policies and Bill Shorten’s credibility in delivering them, the Coalition was able to inflame voters’ doubts about the opposition’s “tax and spend” agenda. Lewis also says that economic management advantage can be eroded if voters perceive the Liberals aren’t delivering on issues such as cost of living, wages growth and job security.
This analysis is bolstered by his Essential Poll, which found 56 per cent of voters believe “the government should stimulate the economy to help prevent a downturn and delay the surplus”. Voters were also asked what they thought was the main cause for the International Monetary Fund downgrading of Australia’s economic outlook. Only 42 per cent thought it was global factors outside the federal government’s control.
In the past sitting fortnight, the government’s mantra was that it offers “stability and certainty” and would not be panicked into reckless spending. Nor would it plunge the budget into deficit, as Labor did at the time of the global financial crisis. While it is true we have not arrived at the dire situation Australia faced in 2008-09, Morrison is running out of time to hold his nerve on several fronts besides those already mentioned. The only question is how long it will take for voters to lose patience.
Here the prime minister may have one thing going for him. In the opinion of retiring senator Arthur Sinodinos, who was speaking at his farewell government party room appearance, Scott Morrison’s government is perceived “as a first-term government”. John Howard’s canny former chief of staff told his Liberal and Nationals colleagues: “This is an opportunity for us.” First-term governments, if they can hold themselves together, are generally given the benefit of the doubt by voters. There is a certain discount given for being new and having to learn the ropes, whereas, by the time a party is in its third term, the view hardens. “We’ve given you a chance and you’ve failed to deliver” is the sentiment that goes a long way to explaining the difficulty of long-term survival in power.
The ticking clock that is the Royal Commission into Aged Care Quality and Safety handed down its interim report on Thursday. Morrison announced the royal commission within a month of becoming prime minister. It was widely seen as a time-buying exercise in the face of mounting media revelations of abuse, neglect and gross mismanagement in the sector. The government had already received two high-powered reports on the crisis. It is no surprise that already this commission, after nine months of harrowing evidence and almost 7000 submissions, has found “aspects of the aged care system cruel and unkind”.
Nor is it any surprise that the remedy will not come cheaply, or without a dramatic cultural change that puts people before profits and ends entrenched institutional indifference. The government has begun responding with a new Charter of Aged Care Rights and new safety standards. But the Australian Medical Association finds much of this a “tick box exercise”, compounded by the fact the major for-profit providers are too big to fail or to buckle to regulations that eat into their multimillion-dollar bottom line.
At the beginning of the week the Adelaide national conference of Leading Age Services Australia (LASA) called for “an urgent funding injection of $1.3 billion”. On Sunday, the organisation’s chief executive, Sean Rooney, told a crowd of more than 1200 people, including 600 aged-care service providers, that “we need urgent action right now to avert the risk of service failures, job losses and missed care – with our total focus on the best outcomes for older Australians”.
Last month the prime minister told parliament he wanted to “ensure that the results of this royal commission are fully implemented” but “the only way you can do that is by ensuring you maintain a strong budget … and that’s what our government is doing”. In Morrison’s world view, thanks to the “virus” Keating says he has contracted, a strong budget is a surplus budget. Something has got to give here.
Consider this: in the 2018-19 budget $20.5 billion was allocated to aged care, with the outlay increasing by $1 billion a year over the forward estimates. Minister for Aged Care and Senior Australians Richard Colbeck, who left delegates at the Adelaide conference disappointed by his seeming lack of urgency, says the government is responding. It had increased funding for home-care packages by $2.2 billion since last year’s budget. That boosted the number of packages by 25,000. But that still leaves a waiting list of 100,000. And according to figures cited by Labor in parliament, 16,000 elderly Australians died while waiting for their approved home-care package last year.
On Tuesday there was another threat to the icon if not the virus of the government’s budget surplus commitment. In Perth Anthony Albanese sought to prove he has not spent the past six months since assuming Labor’s leadership in hibernation. He delivered the first of his “vision statements”. It was a direct challenge to Morrison’s insistence that protecting the projected budget surplus come hell or high water is a priority. Instead, he said, that plan is a recipe for the stagnation we are seeing.
Albanese characterised his speech as a vision for jobs and the future of work. He said it was “no longer possible for any nation to assume that economic success is inevitable”. Governments must be a driver of economic activity and productivity, he said. He noted that last year the government announced it was allocating $30 million over four years to support the development of artificial intelligence. “That’s a start,” he said, “but bear in mind our Singaporean neighbours are devoting around five times that amount.”
And while seeking to repair the electoral damage caused by Labor’s failure to link its climate change ambitions to jobs growth and the future of the coalmining industry, he was just as keen to challenge the Coalition’s claims that it alone understood business. He said, “Like Bob Hawke and Paul Keating, I understand that building the future means we must first and foremost be in the business of creating wealth, as well as ensuring it is distributed fairly.”
He said the decline in business investment under the Coalition is concerning. He called on Morrison and Treasurer Josh Frydenberg to “bring forward ... the infrastructure investment that is needed to stimulate the economy”. And he urged the introduction of an upgraded investment guarantee “as part of a measured economic stimulus package to boost our sluggish economy”. He almost sounded like a spruiker for the Business Council.
Albanese is aware the compact that kept the tight Labor discipline of the past six years was broken when Bill Shorten lost the “unloseable election”.
While the Morrison government may be on the borrowed time of a third-term administration that has to live up to expectations, Albanese has to restore the shattered confidence of his caucus colleagues and convince them he is their best bet to fight the next election.
Some of Albanese’s allies say the background sniping against him has already begun. But one insider says when the election loss analysis is released next month some of the alternatives won’t look all that flash. Of course in the longer run events will shape outcomes and, as we saw in the past three years, they can be miraculously unpredictable. But Morrison, for one, will be hoping – maybe praying – that will not be the case with his predicted budget surplus.
This article was first published in the print edition of The Saturday Paper on Nov 2, 2019 as "Objects of infection". Subscribe here.